Monday, May 28, 2007

Burdens of operating a century-old brand

They may carry BlackBerrys instead of fountain pens, but many executives still sport the suit label their great-grandpas wore: Hart Schaffner Marx.

Founded in Chicago in 1887, Hartmarx Corp. has a longstanding reputation for high-quality tailoring that has helped it grow from a single, family-owned clothing store into a $600-million company that is the largest suit maker in America.

Hartmarx makes suits under 14 labels it owns or licenses, including Hart Schaffner Marx, a classic line that retails for upwards of $700 in stores like Macy's, and Hickey Freeman, a luxury line aimed at CEOs that sells for $1,200 at Neiman Marcus.

But maintaining a century-old brand has burdens, too. "Every 10 or 20 years, you have to make some dramatic changes," CEO Homi Patel, 57, says. "If you get stuck in what you did before and are not constantly evolving, it can be a problem."

This company is #90 on Crain's 2007 list of the Chicago's largest public companies. The full list is available online in HTML, PDF and Excel spreadsheet format.In 1982, Hartmarx branched into men's sportswear, manufacturing golf apparel by Jack Nicklaus and polo shirts and slacks for British label Ted Baker. More recently, it embraced women's apparel. Through acquisitions, it owns 10 womenswear lines, a division that has grown from 8% of business in 2004 to 25% today.

One advantage Hartmarx has over competitors trolling for women's brands is a reputation for giving designers creative freedom, says Gary Giblen, an analyst with Brean Murray Carret & Co. in New York. "Most other companies centralize everything and make it hard for an entrepreneur to stay on," he says.

That's an important edge as Hartmarx continues to diversify its clothing lines, a strategy that has become crucial as more companies relax their office dress codes. In the early 1980s, 95% of company revenues came from suit sales. Today, it's 48%.

Last year, Hartmarx took a hit on its suit lines when department stores Marshall Field's and Saks Fifth Avenue changed hands. The new owners pared the higher-end brands and pushed their own private labels, causing Hartmarx's net earnings to plunge 69% year-on-year to $7.3 million. To compensate, Hartmarx is boosting production of its luxury brands and looking for new customers abroad.

Last December, it licensed the Hart Schaffner Marx name to Youngor Group Co. Ltd., the largest men's apparel manufacturer and retailer in China. The agreement calls for 400 stores across China in 20 years. Six of those stores are scheduled to open in the Shanghai area this fall.

Hartmarx is seeking similar partners in India and Vietnam. If all goes well, Asian businessmen won't just be buying a suit; they'll be starting a family tradition.